Under Trump's New Tariffs, Expect to Pay More for Discarded Goods from Temu and SHEIN
President Trump's recent tariff war kicked off over the weekend, striking a chord with some of the United States' closest allies. The new policy imposes taxes, or as we like to call 'em, new costs, on imported goods from Canada, Mexico, and China. This means folks in America might find themselves spending more cash on everyday essentials like maple syrup and PC hardware.
This tariff policy has garnered some disapproval, with politicians like Rand Paul and Mitch McConnell voicing their opposition. The tariffs on Mexico have been temporarily paused as the two nations work towards striking a deal. One silver lining could be that Temu and SHEIN might face a tougher time supplying teenagers with disposable wares from China, where some believe forced labor is involved in the manufacturing process.
The tariffs announced by President Trump target goods shipped from Canada and Mexico with a 25% levy, along with a 10% tariff on Chinese imports. The Executive Order justifies these actions with various arguments, such as those countries not investing enough in national security, like stopping the distribution of fentanyl. The order also does away with the "de minimis" exemption, which previously allowed packages valued less than $800 to dodge tariffs. This exemption was beneficial to retailers like Temu and SHEIN, enabling them to ship directly to United States customers without paying numerous fees.
Another contentious topic over the years has been the postal service's charging structure. It's often cheaper to send a package from China to the U.S compared to sending a package within the country. This allows Temu and SHEIN to hurtle into popularity by quickly catching up on trends in America, producing cheap knock-offs, and marketing them through social media. These companies serve as modern-day H&M or Forever 21, but with an AI-powered boost. Temu alone is expected to rack up sales of $30 billion in U.S. by 2025.
TikTok and Amazon have both unveiled budget stores recently, in response to Chinese e-commerce's rise. Walmart, open to third-party merchants on its platform, has seen an influx of imitation products, including replicas of luxury items like the Hermès Birkin handbag – but for much lower costs. Regardless of the platform, we're still mostly discussing products that originate in China.
Amazon might be hit hard by the new tariffs, too, as much of its merchandise is shipped from China to U.S. warehouses. But at least it'll be more evenly matched against Temu and SHEIN.
Many of the products offered by Temu and SHEIN are, unsurprisingly, cheap and disposable. Trinkets like $3 earrings and $5 dresses, often made of barely-there materials, are good for a few uses before they head to the trash. Sometimes these products even pose danger, as reports of lead levels have surfaced in items from these sites. But they offer teenagers an affordable way to mimic their favorite influencers' looks. And in the end, value is what most consumers crave. They're willing to swap quality for cheap thrills, even if it comes at the expense of the planet.
It was reported by Reuters last week that the European Union is contemplating a new policy, making Temu and SHEIN liable for dangerous or illegal products sold on their platforms.
It's worth mentioning that these Chinese companies might require extra scrutiny, but President Trump's blanket tariffs pose the risk of being regressive. This move might disproportionately harm lower-income Americans by driving up the cost of everyday goods, while other manufacturers will also suffer. Goods made in the U.S. will become more expensive, affecting clothing manufacturers that import materials.
However, these blanket tariffs may not lead to the demise of Temu and SHEIN. The companies have been less dependent on shipping loopholes as time goes by, understanding that deceptive tactics are unsustainable. They've shifted to using sea freight and warehousing nearby the U.S. to minimize reliance on the now-unavailable loophole. This means they'll have to pay the new 10% tariff on bulk shipments, but they'll survive.
Some question the impact of President Trump's actions, suggesting that Customs and Border Protection lacks the resources to inspect every shipment entering the country, particularly those from retailers like Temu and SHEIN. This could mean the "garbage flow" will continue, even if at a slightly slower pace.
Enrichment Data:
Overview:
Impacts of President Trump's Tariff Policy
- PC Hardware:
- Price Increases: The 10% tariff on Chinese-made computing equipment is expected to increment PC prices, but the impact will be mitigated by manufacturers and channel partners absorbing some of the cost and by offering PCs with lower specifications at lower price points. The rise in average PC prices is projected to be around 9% to 9.5% this year, considering inflation and changes in typical specifications.
- Supply Chain Adjustments: The supply chain is likely to adapt by narrowing margins and offering new PCs with lower specifications to maintain affordability. This could result in a rise in average PC prices by 9% to 9.5% this year, considering inflation and changes in typical specifications.
- Inventory Management: PC inventories in the US are low due to slow sales and risk-averse resellers, which means price increases will soon flow through to enterprises. There are approximately 30 days of PC inventory in the US channel.
- Budget Chinese E-commerce Sites like Temu and SHEIN:
- Tariff Impact: The revocation of the duty-free rule for small packages from China will increase tariffs on low-value imports, affecting retailers like Temu and SHEIN. This could lead to higher costs for these retailers and potentially impact their business models.
- Adaptation Strategies: Temu has adapted by using a semi-managed model and shifting to sea freight, while SHEIN remains reliant on air freight. This shift could help manage the short-term impacts but may not fully mitigate the effects of higher tariffs.
- Regulatory Scrutiny: Both Temu and SHEIN are facing regulatory scrutiny in the EU for selling unsafe and dangerous products. The EU has initiated a joint investigation into SHEIN based on suspicions of violating EU consumer-protection rules, and both companies are at risk of being held liable for promoting and selling non-compliant products.
Potential Solutions for Ensuring Product Safety:
- Enhanced Quality Control:
- Pre-shipment Checks: The EU is proposing to use an e-surveillance tool to check products before they are shipped to ensure they are not dangerous or non-compliant. This could help identify and prevent the sale of unsafe products.
- Collaboration with Consumer Agencies: Companies like SHEIN have committed to engaging with relevant consumer agencies and the EU to address concerns about product safety. This collaboration could result in better compliance with regulations and safer products for consumers.
- Regulatory Enforcement:
- Liability for Non-compliance: The EU is planning to hold marketplaces like Temu, SHEIN, and Amazon liable for the sale of non-compliant or dangerous products. This increased liability could incentivize these platforms to improve their quality control measures and ensure compliance with EU regulations.
- Consumer Education:
- Awareness Campaigns: Educating consumers about the risks associated with cheap, unsafe imports could help reduce demand for such products. This could be achieved through awareness campaigns and better labeling of products to indicate their origin and safety standards.
- Customs Reforms:
- Handling Fees: The EU is proposing to introduce a handling fee for e-commerce imports to cover the costs of supervising these imports. This measure aims to ensure that the environmental and climate impacts of high-volume e-commerce parcels are addressed.
By implementing these measures, the EU aims to create a competitive e-commerce sector that keeps consumers safe, offers convenient products, and is respectful of the environment.
The new tariffs introduced by President Trump could potentially drive up the cost of PC hardware, as they impose a 10% levy on Chinese imports. In the future, technology companies might need to adjust their supply chains to mitigate these increased costs.
The repercussions of President Trump's tariff policy extend to budget Chinese e-commerce sites like Temu and SHEIN. With the revocation of the duty-free rule for small packages from China, these retailers may face higher costs and potentially impact their business models. In response, companies like Temu have shifted to using sea freight, while SHEIN remains reliant on air freight to manage the impacts of higher tariffs in the short term.
